Tuesday April 15, 2008 - 10:56:39 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro eyes record peak vs dlr as rates seen steady
(Changes byline, updates prices, adds quotes)
By Simon Falush
LONDON, April 15 (Reuters) - The euro came within half a
cent of record highs against the dollar on Tuesday as European
policymakers reiterated a hawkish monetary policy stance and
jitters on the health of the U.S. economy persisted.
Those jitters, and fresh doubts about credit markets, are
overshadowing support for the dollar from the Group of Seven
financial leaders' strongest expression in seven years about
volatility in major currencies, traders said.
The euro meanwhile was boosted by the European Central
Bank's continued inflation focus, which analysts reckon will
prevent it from cutting rates for a few more months.
ECB Executive Board member Juergen Stark and Governing
Council member Miguel Angel Fernandez Ordonez stressed the
bank's commitment to price stability in separate comments on
The head of Germany's ZEW economic institute said he would
recommend the ECB not to lower rates this year after the current
conditions component of its economic sentiment index rose
"The euro zone ... is set to remain on hold (on rates) in
the near term and that's supporting the euro," said David Pais,
currency strategist at Citi.
"Investors are nervous ahead of bank earnings with markets
waiting to see how big writedowns are and how bad things are."
Results from Merrill Lynch (MER.N: Quote, Profile, Research) and Citigroup (C.N: Quote, Profile, Research) are
due later in the week, with analysts expecting both to announce
billions of dollars in bad debt write-downs.
By 1008 GMT the euro was steady at $1.5845, within sight of
the record high of $1.5912 hit last week according to Reuters
data, and recovering from a post-G7 low of $1.5669 <EUR=>.
With French EU-norm inflation jumping to a record 3.5
percent year-on-year last month, the data should keep ECB
rhetoric hawkish, analysts say.
ECB President Jean-Claude Trichet and Governing Council
member Axel Weber attend a book launch at 1500 GMT, and
Executive Board member Gertrude Tumpel-Gugerell speaks at a
banking conference in Athens at 1730 GMT.
The dollar edged lower to 100.97 yen <JPY=>, and the euro
also fell slightly to 159.90 yen <EURJPY=>.
Sterling fell 0.5 percent to $1.9680 <GBP=> and hit a record
low of 80.65 pence per euro <EURGBP=> after the Royal
Institution of Chartered Surveyors' British house price survey
showed the lowest reading in its 30-year history.
"This is a clear signal that things in the housing market
are getting worse," said Ian Stannard, senior foreign exchange
strategist at BNP Paribas. "The mid-term trend in sterling is to
The euro has risen around 9 percent versus both sterling and
the dollar since the start of the year.
The G7 financial heads said on Friday they were worried that
sharp currency moves could undermine economic and financial
stability. But analysts were sceptical whether those words would
translate into coordinated intervention to prop up the dollar.
The dollar has come under pressure due to a sluggish U.S.
economy -- which some think is already in recession -- and 3
percentage points in rate cuts since September.
The Federal Reserve is expected to cut its fed funds rate
again later this month from the current 2.25 percent.
The U.S. producer price index for March is due later on
Tuesday and the U.S. March consumer price index on Wednesday.
The health of the U.S. financial sector remained in the
spotlight after Wachovia (WB.N: Quote, Profile, Research), its fourth-largest bank, posted
a surprise first quarter loss due to credit problems from
mortgages and other debt, and cut 500 jobs [ID:nN14343221].
(Additional reporting by Naomi Tajitsu)
(Editing by Gerrard Raven)
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